Why in the News?

• The US House of Representatives has passed the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026, a Bill that could allow the US President to impose tariffs of up to 100% on countries purchasing Russian oil and natural gas.
• The legislation is particularly significant for India because Russia currently accounts for nearly half of India's crude oil imports.

What’s in Today’s Article?

• India’s Dependence on Imported Crude Oil (Background, About US Bill, Key Features of the Bill, Potential Impact on India, India’s Position, etc.)

Background: India’s Dependence on Imported Crude Oil

• India is heavily dependent on imports to meet its energy requirements. According to the attached report, the country imports more than 88% of its crude oil needs.
• Russia's position as India's major crude supplier emerged after the February 2022 Russia-Ukraine conflict. As several Western countries reduced purchases of Russian crude, Russia offered discounted oil to willing buyers, including Indian refiners.
• This resulted in Russia becoming India's largest source of crude oil, replacing traditional suppliers from West Asia.
• The arrangement also became an important energy-security hedge, particularly during disruptions in West Asian oil supplies.
• India imported approximately 2.08 million barrels per day (bpd) of Russian crude in August 2026, accounting for around 45% of India's total oil imports. The share was above 50% during the preceding two months.

What Does the US Bill Propose?

• The latest version of the Bill gives the US President discretionary powers to impose tariffs of up to 100% on the five largest buyers of Russian oil and natural gas.
• This represents a substantial reduction from the original proposal, which had contemplated a 500% tariff on countries purchasing Russian energy.
• If the legislation becomes law, the US Trade Representative would identify the countries subject to the measures and recommend applicable tariff rates.
• Targeted countries would normally receive 180 days to reduce their Russian energy imports or negotiate with Washington, although the President could shorten this period.

Russia’s Importance for India’s Energy Security

• The importance of Russian crude is linked to both availability and competitiveness.
• Indian refiners increased purchases of Russian crude because discounted supplies provided an economically attractive source of oil.
• With the West Asia conflict affecting regional energy flows, replacing Russian supplies has become more difficult.
• India therefore faces a policy challenge involving three interconnected objectives:
  • Maintaining energy security
  • Managing the cost of imported crude
  • Protecting India's wider trade and economic interests
• A rapid reduction in Russian imports could require India to source additional crude from alternative suppliers, potentially affecting procurement costs and refining economics.

Potential Impact on India

• Higher Energy Costs
  • If India faces punitive tariffs or significantly reduces Russian oil purchases, it may need to source additional crude from other markets.
  • Given India's high import dependence, higher international crude prices could increase the country's import bill and domestic inflationary pressures.
• Refinery Economics
  • Indian refiners have benefited from access to discounted Russian crude. A disruption in these supplies could alter refinery margins and procurement costs.
  • The impact would depend on the availability and prices of alternative crude grades.
• Trade Negotiations with the US
  • The legislation could provide Washington with an additional instrument during ongoing India-US trade negotiations.
  • India and the US have already been negotiating a bilateral trade agreement, and the possibility of tariffs linked to Russian energy purchases could influence the negotiating environment.
  • The attached reports note that India had already made several concessions of interest to the US, including measures relating to digital services, data centres, energy imports, nuclear-sector access and selected import duties.

India’s Position

• The Ministry of External Affairs stated that India remains committed to ensuring energy security through diversified sourcing and evolving market dynamics.
• India has also communicated to US representatives its concerns regarding the proposed legislation and its potential implications for both the India–US relationship and the global energy market.
• The government has indicated that it will take necessary measures to protect India's trade and economic interests and work with Indian trade and industry bodies to address the consequences of the legislation.

Global Energy Market Considerations

• The proposed sanctions come at a time when global energy markets are already experiencing supply pressures because of the West Asia conflict.
• Removing a major volume of Russian crude from international markets could potentially tighten global supplies further.
• This creates a policy dilemma for countries attempting to impose economic pressure on Russia while simultaneously managing energy prices.

US Domestic Economic Context

• The proposed measures also come amid concerns over inflation and energy prices in the United States.
• The report highlights that Brent crude had risen above $100 per barrel, while US fuel prices were increasing. The United States is also approaching its November midterm elections.
• These domestic economic considerations could influence how aggressively the new sanctions framework is eventually implemented.

Way Forward for India

• India's response is likely to require a combination of energy diversification and diplomatic engagement. Key priorities include:
  • Diversifying crude suppliers and import routes
  • Maintaining adequate strategic petroleum reserves
  • Increasing cooperation with traditional and emerging energy suppliers
  • Engaging Washington on possible exemptions or waivers
  • Strengthening domestic refining and energy efficiency
  • Assessing the impact of sanctions on Indian exporters and financial institutions
• The situation also highlights the importance of maintaining strategic autonomy while managing India's economic relationships with major global powers.